(Preliminary Agreements) and
Purchase Price and Working Capital Adjustments
The purpose of this article is to outline the aspects of M&A transactions that tend to give rise to disputes and, against that background, examine how arbitrators hearing those disputes have decided them so as to help practitioners better guard against the risks and also highlight the unique aspects of arbitration as a method of resolving disputes in M&A. Frequently, the general disputes clause of a merger or acquisition agreement calls for some form of arbitration. There also usually are particular aspects of the transaction, such as post-closing price or working capital adjustments that have their own dispute resolution process, typically revolving around referral to an accountant or an expert, which may or may not be considered some form of arbitration. “M&A” will be defined in a broad sense, encompassing acquisitions of both stock and assets of targets and joint ventures. The focus of this article will be agreements governed by New York law – and in some cases, Delaware law, given the prevalence of Delaware law agreements in the U.S. for many types of corporate transactions.